Perverse Profit Incentives of Infused Cancer Drugs

The business of cancer care is complex, and not always, shall we say, fair and transparent to patients … especially when it comes to treatment costs.

Unlike buying a computer, a car, or even contracting a kitchen renovation—when you have a clear idea of what something will cost before you purchase—the delivery of cancer treatment in the U.S. lacks clarity. Two words sum it up: buyer beware.

This opaqueness is especially problematical when it comes to cancer therapies such as chemotherapy that are infused intravenously in a hospital or clinic. The decision-making process, through which standard of care drug(s) are recommended and ultimately prescribed, can cross a line that favors profit over true patient value.

The business of cancer care in the U.S. is just that: a business. A large business. And just like any other company that markets and sells products and services, you must do your homework—due diligence—before making a purchase, especially expensive ones that often make the difference between life and death.

[Related content: The Business of Cancer: Your Purchasing Power]

I am a capitalist at heart. I do believe, until it’s proven differently, that if healthcare was socialized in the U.S.—such as Medicare for all—it would ultimately result in lower drug prices, but there would be less innovation around novel assays, precision medicine/oncology, and drug development and delivery itself.

I am also pragmatic; acutely aware that our health system is broken on myriad levels. The incentivization model for the delivery of what should truly be ‘health’ and ‘care’ is perverse. Look no further than anticancer drug treatment itself for a clear-eyed lens on our broken system.

Enter Dr. Aaron Mitchell

Aaron Mitchell, MD, MPH is a medical oncologist at Memorial Sloan-Kettering Cancer Center in New York City, and has specific expertise as a health services researcher.

Mitchell’s work was brought to my attention through a recent episode of Relentless Health Value Podcast hosted by Stacey Richter. It can be heard here.

In the podcast, Mitchell digs deep into the financial toxicity of the current drug delivery model, and specifically as it relates to drugs that are infused intravenously.

Per his bio, he focuses on understanding the interaction between financial incentives and physician behavior, and how reforms to current remuneration models for oncology services may be enacted to realize better patient outcomes, and reduce low-value care.

The oncologist previously led an ASCO-funded observational study, according to his bio, “to assess oncologists’ responsiveness to reimbursement incentives in using high-cost, low-efficacy drugs—and he continues to study physician-level factors associated with use of low-value treatments.”

His bio also mentions a current project— “…measuring financial conflicts of interest among oncologists, and the influence of these conflicts on clinical practice and guideline recommendations.”

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One Mitchell-led published paper of particular note from 2016 is Financial Relationships With Industry Among National Comprehensive Cancer Network Guideline Authors. It’s well worth the read.

Buy and Bill Paradigm

Clinics and hospitals purchase drugs in bulk, and essentially re-sell it to payers such as commercial insurance companies or Medicare/Medicaid. This model is termed ‘Buy and Bill’. The drug markup is typically 4.5% to 20%. Some hospital provider markups can be as high as 4-6 times the actual cost of the drug—that wide of a range.

This calculated profit is in addition to what the facility bills to administer the treatment itself.  Put simply, and sadly—and with few exceptions: the higher the drug cost, the higher the clinic’s or hospital’s profit margin.

More Pressure on Private Cancer Clinics

There is a factor which, in effect, penalizes small clinics: hospitals pay less for anticancer drugs than private oncology clinics—yet they charge more than their small counterparts. Most patients and their families do not realize this because they don’t work in the oncology field. This cost difference in purchase price is because hospitals have more purchasing power than smaller clinics, and then, in a double-whammy, hospitals are generously reimbursed from commercial payers.

The unfortunate reality of higher drug costs to small clinics, and lower reimbursements from payers, has made it incredibly difficult for many small, independent community oncology clinics to stay in business.  The lower profit margins have forced a steady consolidation of these small community cancer clinics into various health systems across the country.

Key takeaway: Infused cancer treatment costs patients less when administered at a private, community cancer clinic than within a hospital setting.

It should also be noted that drug purchases for clinics and hospitals operating in poorer areas, if they meet specific criteria, are subsidized through the Federal government’s 340B Drug Pricing Program.

The aforementioned are significant and complex challenges that any patient with out-of-pocket cancer care costs should gain a clear understanding.

Paying Significantly More for Marginally Improved Treatment

When it comes to the treatment decision process, there is built in incentive to prescribe newer, novel treatments that are more costly. Not only does the treatment team want their patient receiving the newest, therefore ‘best’ therapy, but the patient (and their family) seeks it, too. But these newly FDA-approved therapies are often only marginally more effective than existing agents that typically cost a mere fraction of the new ones.  Some are even less effective… and were still FDA-approved.

The Good and the Ugly

To extend my previous point, what follows are a couple paragraphs from my recent piece The Anticancer Drug Dilemma: The Good and Ugly.

“The Good…

Across several types of malignant disease, people are truly living longer because novel anticancer therapeutics can significantly improve cancer control and overall survival rates. These remarkable drugs and interventions include various immunotherapies, Bruton’s tyrosine kinase inhibitors (TKIs), checkpoint inhibitors, combination targeted therapy, vaccines, and CAR-T—the first FDA-approved cell-based gene therapy also considered immunotherapy.

… The Ugly 

There are several FDA-approved drugs that only marginally extend survival time. The threshold for statistical significance when measuring one ‘old’ anticancer drug versus a ‘new’ drug can be a matter of a few weeks or a couple months. In fact, almost one-third (30%) of FDA-approved cancer drugs show zero overall survival improvement.

Most patients are not aware of this systemic problem, and can be overpaying for similar, and sometimes less efficacious, treatment than the older ones.

Cancer Care Financial Toxicity 

Cancer treatment can be toxic, but financial toxicity can be equally deadly, as there is a correlation between patient financial distress and higher levels of mortality.

If you are living in the U.S. and on Medicare, and you also have a solid secondary policy, you may likely be responsible for no co-pay or have a low out-of-pocket cost. Without a secondary policy to cover the 20% that Medicare does not pay, the 20% can often result in financial toxicity.

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The same is often true for those with commercial insurance policies with sky-high deductibles, and drug coverage that inadequately covers expensive targeted drugs that can cost way north of one-hundred-thousand dollars per year.

U.S. cancer care outcomes are marginally better than the next 22 major economies. But our care is delivered at twice the cost. Drug costs are a leading driver of these runaway costs. We approve many more novel agents as standard of care more quickly, and at a much greater cost, than other major developed countries. As discussed above, this can be a very good thing or very bad thing, from both the standpoint of efficacy and financial toxicity.

Capitalism and Compensating Value

I shared above that I am a free market capitalist at heart. Clinics and hospitals have a right to be profitable. And this also goes for the ‘nonprofit’ hospitals and health systems that handsomely pay their executive staffs and employed practitioners.  

As Stacey Richter and Dr. Mitchell discuss on this podcast, business planning and modeling needs to be done that focuses on value, and provides more comprehensive and meaningful patient support. They discuss the potential of a shifting of compensation—and higher payer reimbursements—for those providing critical patient services such as psychosocial support personnel, dieticians, and occupational therapists.

Of course, as a proponent of integrative oncology, I would also like to see more access and better compensation for complementary therapies such as acupuncture, massage therapy, exercise physiology, and additional interventions that both mitigate the often deleterious side effects of cancer treatment itself, while strengthening immune function and resiliency.

Patient Beware 

As a savvy patient or caregiver, you must do your own research to corroborate a recommended treatment approach. This is especially important when infused drug agents are part of the treatment regimen.

Ask your oncologist why a particular drug or combination of drugs is being recommended and how that is informed. An oncologist has quick access to published drug trials and can print these for you. Just ask. You can also do your own due diligence using PubMed.

Critically, you have the ability to contact your health insurance provider or Medicare to learn about the out-of-pocket cost responsibility of any drug therapy prior to agreeing to that particular treatment. As mentioned earlier, the cost and administration of a drug—or combination of drugs—can vary widely between community oncology practices and hospitals. So also ask about that.

Kudos to Aaron Mitchell for his important work on such a vital subject—and to Stacey Richter and Aventria Health Group for bringing this insight to a larger audience. Make sure to listen to their eye-opening podcast.

(P.S.— I was featured on an earlier Relentless Health Value podcast on integrative oncology and academic hospitals that can be heard here.)

Join my private Facebook Group Anticancer Thrivers—a community forum for achieving your best life while living with cancer.

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